Archive for August, 2009



August 31st, 2009

Tropical Storm Krovanh

Posted at 4:27 PM ET

new-small-tropical-storm-krovanhTropical Storm Krovanh is located approximately 108 miles (174 kilometers) east-northeast of Tokyo, Japan and continues to accelerate north-northeast, according to the Joint Typhoon Warning Center (JTWC). Krovanh is currently a tropical storm and is moving at 21 mph (34 kmph) with sustained winds of approximately 58 mph (93 kmph).

Krovanh battered Tokyo and the east coast of Japan on Monday bringing heavy rain and winds. According to reports, the storm disrupted train and flight schedules, cancelling 27 international and 30 domestic flights at Tokyo’s Narita and Haneda airports, and delaying many others.

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August 31st, 2009

Hurricane Jimena

Posted at 1:00 PM ET

small-hurricane-jimenaIntense Hurricane Jimena is located approximately 370 miles (595 kilometers) south-southeast of Cabo San Lucas, Mexico and currently packs sustained winds of around 145 mph (230 kmph), according to the National Hurricane Center (NHC).

The NHC has reported that Jimena, which has intensified quickly since it formed early on August 29, 2009, is currently an extremely dangerous Category 4 hurricane on the Saffir-Simpson scale, with hurricane-force winds extending outward up to 30 miles (45 kilometers) and tropical storm force winds extending outward up to 80 miles (130 kilometers) from the storm’s center. Jimena is currently moving towards the northwest at approximately 8 mph (13 kmph) and a gradual increase in forward speed accompanied by a turn toward the north-northwest is expected during the next day or so. Current forecasts from the NHC expect Jimena to be approaching the southern portion of the Baja California peninsula on September 1.

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August 31st, 2009

Update: Tropical Storm Danny

Posted at 7:19 AM ET

small-aug31-tropical-storm-dannyDanny was reported to have become absorbed by an extra-tropical depression over North Carolina early on August 29, 2009. The National Hurricane Centre (NHC) reported that at 09:00 UTC on 29 August, the remnants of Danny were located around 80 miles (130 kilometers) southeast of Cape Hatteras, North Carolina and around 540 miles (875 kilometers) south-southwest of Nantucket, Massachusetts. As of 09:00 UTC on August 29, the tropical storm watch for the North Carolina coast from Cape Lookout northward to Duck, including the Pamlico and Albemarle sounds, had been discontinued.

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August 31st, 2009

Top 10 Stories: August 2009

Posted at 1:00 AM ET

1. 1H2009 Reinsurer Financial Update: Capital Returns: Underwriting and investment gains contributed to a general increase in capital in the first half of 2009. Some reinsurers have even regained half or more of what they lost as a result of last year’s hurricanes and financial shocks. Financial market stability has opened several options unthinkable nine months ago, including share buybacks, dividends and even maintaining a bit of extra capital as a cushion — after all, it was the excess capital held at the beginning of last year that helped reinsurers withstand the effects of the financial crisis.

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2. Cat Bond Update: Second Quarter 2009*: The catastrophe bond market continues to advance, though issuances are down from 2008. The activity represents a positive rally from the hiatus during the second half of 2008. For the first half of 2009, nine bonds have been issued, with aggregate risk capital of USD1.38 billion. The continuing stabilization of financial markets and a decrease in catastrophe bond spreads, however, could result in more issuance activity in the second half of the year, particularly for sponsors which had considered issuances in the first and second quarters but deferred their plans because catastrophe bond spreads were considered to be too wide (i.e., catastrophe bond protection was considered to be too expensive).

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3. What Does Solvency II Mean for Insurance Groups?: When Solvency II becomes effective in 2012, group support — which would have allowed capital held at the group level to cover the requirements of any company in the group — will be not permitted. This prohibition will require group entities to hold capital according to the Solvency Capital Requirements (SCR) in each individual entity. The application of group-level diversification benefits to individual entities will not be allowed. This last-minute change to the original framework directive may cause some groups to change their structures. At a minimum, they are likely to rethink how much risk capital will be carried at the group level versus the operating entity level given that the risk capital needed in the group will increase without recognition of group support.

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August 31st, 2009

ERM Did Not Fail in 2008, Part I: A Year of Significant Loss

Posted at 1:00 AM ET

mango_smallDonald Mango, Chief Actuary
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The profound financial damage that began last year has left the insurance industry looking for answers. Diligent underwriting and conservative investment strategies were not enough to prevent natural and financial catastrophes from bleeding balance sheets. Both firm leadership teams and key stakeholders have questioned the value of Enterprise Risk Management (ERM) frameworks, yet the conclusion that ERM failed may be hasty. After all, the insurance industry actually survived the events of 2008 reasonably well, with at least some of the credit going to their ERM efforts. Where risk management did fail, the underlying causes were deeper.

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August 29th, 2009

Solvency II – Summary of CEIOPS March Consultation Papers: Index

Posted at 1:00 AM ET

Preview: The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) published its first set of Consultation Papers, 12 in all, on Level 2 Implementing Measures on Solvency II in March. These drafts have been developed to expand on the general approach outlined in the Solvency II Directive Proposal that was adopted in December 2008. The second set of 24 papers was published by CEIOPS at the beginning of July. The third set is scheduled for November-to-December 2009.

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Transparency and Accountability for Supervisors: Consultation Paper No. 34 addresses transparency and accountability for supervisors, expanding on Article 30 of the Solvency II Directive. The Paper aims to make information related to supervision available in a timely manner to all interested parties. Its two main objectives — effectiveness of supervision and convergence of supervisory practice — are achieved by facilitating the interaction between the regulator and the supervised entity, ensuring the transparency of supervisory requirements, and providing easy access to the disclosed information. The result is to facilitate the comparison of supervisory approaches.

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August 28th, 2009

Week’s Top Stories: Aug 16 - 28, 2009

Posted at 11:59 AM ET

1H2009 Reinsurer Financial Update: Capital Returns: Underwriting and investment gains contributed to a general increase in capital in the first half of 2009. Some reinsurers have even regained half or more of what they lost as a result of last year’s hurricanes and financial shocks. Financial market stability has opened several options unthinkable nine months ago, including share buybacks, dividends and even maintaining a bit of extra capital as a cushion — after all, it was the excess capital held at the beginning of last year that helped reinsurers withstand the effects of the financial crisis.

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Five Ways to Improve Your Workers Comp Portfolio: Some workers compensation risks seem too difficult to cover. Excess loss rates are unpredictable, on the rise and difficult to analyze with the conventional tools. And, reinsurance may not be available at some layers. A carrier that can find ways to write business for these groups, however, can identify a revenue opportunity ahead of its competitors. Together, reliable modeling and disciplined underwriting can open new markets in a mature industry in which peers tend to look for merely incremental advantages. Using Guy Carpenter’s Reveal® v1.1 excess loss model, now available through the i-aXs® platform, workers compensation carriers can identify the drivers of severity at the class code level, making it possible to develop a plan for protecting capital and profitability.

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Five Ways to Allocate Capital: No single approach to capital allocation is objectively superior. Those that are more effective require an investment of time and resources, while the simpler methods sacrifice accuracy. A tradeoff is required based on a (re)insurer’s priorities and capabilities. Before you make a choice, however, be sure you’re aware of the alternatives.

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August 28th, 2009

Update: Tropical Storm Danny

Posted at 8:37 AM ET

small-ts-danny-3Tropical Storm Danny is located approximately 400 miles (640 kilometers) south of Cape Hatteras in North Carolina and sustained winds have decreased to around 40 mph (65 kmph), according to the National Hurricane Center (NHC). The storm is travelling in a north-northwest direction and a turn to the north with an increase in forward speed is expected today. On this track, Danny is expected to run parallel to the east coast of the United States. The NHC said tropical storm-force winds extend 205 miles (335 kilometers) from the centre of the storm.

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August 28th, 2009

Solvency II – Summary of CEIOPS March Consultation Papers: Allowance of Financial Mitigation Techniques

Posted at 1:00 AM ET

Financial Intelligence Team
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CP31 sets out the principles an entity must adhere to in order to allow the recognition of financial mitigation techniques (e.g., financial derivatives) for Solvency Capital Requirement (SCR) purposes. It states the capital requirement should allow for an appropriate reduction to reflect the mitigation techniques in place while avoiding allowing deductions based on inappropriate mitigation techniques.

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August 27th, 2009

Update: Tropical Storm Danny

Posted at 11:40 AM ET

small-ts-danny-2Tropical Storm Danny is located approximately 370 miles (590 kilometers) east-northeast of Nassau in the Bahamas and packs sustained winds of around 60 mph (95 kmph), according to the National Hurricane Center (NHC). The storm is travelling in a northwest direction and this motion is expected to continue today. Danny is then forecast to take a turn to the north tomorrow with an increase in forward speed. On this track, Danny is expected to pass to the northeast of the Bahamas before approaching the east coast of the United States. The NHC said tropical storm-force winds extend 205 miles (335 kilometers) from the center of the storm.

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